23rd May 2005 07:02
Pillar Property PLC23 May 2005 23 May 2005 PILLAR PROPERTY PLC ("Pillar") Preliminary Results for the Year Ended 31 March 2005 Pillar is one of Europe's leading asset managers of retail parks and the UK'slargest retail park operator, with 6.8 million sq. ft. on 30 retail parks undermanagement. The company has today announced a recommended offer by the British Land Company PLC for Pillar Property PLC. Details of this offer are set out in a separate announcement. Financial Highlights Year to 31.3.05 Year to 31.3.04 Profit before tax £21.7m £20.9mRental Income £58.0m £66.5m(including share of jointventures)Earnings per share 18.8p 19.1pNet asset value per share 801p 603pFunds under management £3,293.8m £2,882.4m(investment properties in HUT/CLOUT/HIF/PREF) • 32.8% increase in net asset value per share in the year • Hercules Unit Trust ("HUT") delivered a record performance, producing its best ever trust return of 36.9%, with over £118m of units traded during the year • Hercules Income Fund ("HIF") formed during the year to invest in small retail parks comprising solus units and clusters, valued up to £20m. Portfolio already at £119m and new co-investors including BAE, BT and Royal Mail pension funds have joined the fund • Pillar Retail Europark Fund ("PREF") grown to 1.24m sq ft retail space on four parks in its first year of trading - strong pipeline of further acquisitions being progressed • City of London Unit Trust ("CLOUT") pre-let and sale of One Coleman Street and Basinghall Street in the year Raymond Mould, Chairman of Pillar, commented: "During the year Pillar has focused on active management of the assets in ourfunds, as well as developing our two new funds PREF and HIF. HUT has deliveredits best ever performance, as well as a substantial increase in its valuationand the level of secondary trading in its units. Whilst in the wider retailsector there have been reports of a slowdown, HUT continues to experience strongdemand from retailers for out of town space. "The value placed on Pillar by today's offer recognises the successful assetmanagement business model that has been created over the past few years." Enquiries: Pillar Property Plc Tel: 0207 915 8000Raymond Mould, ChairmanPatrick Vaughan, Chief ExecutiveMartin McGann, Finance Director Further information can be found at www.pillarproperty.com Gavin Anderson & Company Tel: 0207 554 1400Richard Constant / Charlotte Stone CHAIRMAN'S STATEMENT Our concentration on the core businesses of retail parks and City of Londonoffices has delivered another strong performance. Hercules Unit Trust ("HUT")produced its best ever trust return in 2004; a new trust, the Hercules IncomeFund ("HIF") has been established; the Pillar Retail Europark Fund ("PREF") nowhas four parks with a further two under contract and both development propertiesin the City of London Office Unit Trust ("CLOUT") have been prelet and sold. Inaddition, Pillar's development programme contributed a substantial surplus. Profits Profits before tax for the year to 31 March 2005 were £21.7 million comparedwith £20.9 million for the previous year, an increase of 3.9%. These profitswould have been markedly higher if we had earned a performance fee from HUT.However, in spite of HUT's exceptional performance, no fee accrued to Pillar.Although HUT produced a trust return of 36.9%, at the ungeared level the totalreturn was 23.1% which was identical to the sector benchmark. This has to beexceeded by 1% for Pillar to receive a performance fee. New fee arrangementshave recently been put to the unitholders of HUT which would, if approved,provide an increase in base management fees and a revised HUT performance fee for the future. Dividend In view of the offer from Watchman announced today, the Directors havedetermined that it would not be appropriate at the present time to recommendpayment of a final dividend. Net Assets - Valuation Net assets per share were 801p, compared with 603p last year, an increase of32.8% or 31.5% excluding dividends in both years. Most of this increase has comefrom the continuing strong performance of HUT and from Pillar's developmentprogramme. Net asset value as diluted by options under the management incentiveplan ("MIP") is 780p per share. Net asset value reduced by unprovided deferredtaxation and FRS13 fair value adjustments (commonly referred to as NNNAV) is 700p per share and 684p as diluted by the MIP. Retail Parks - HUT(Pillar 34.4%) HUT has had its best performance since its formation with a total return for theyear to 31 December 2004 of 36.9% and for the second year running it hasproduced the best performance of UK pooled funds. The three year annualisedreturn is now 29.9% per annum. One of the key factors in achieving this performance is the strong and effectivemanagement applied to the portfolio. During the year to 31 March, aggregatesales of £503 million were achieved, the most significant being that of FossePark and Newport Retail Park. Parkgate Shopping Park, Rotherham, Malvern RetailPark and a 50% interest in Banbury Cross Retail Park were acquired for £329million. Although the total number of retail parks has reduced to 22 over the twelvemonths to 31 March, the average size of the parks has increased from 224,000 sqft to 246,000 sq ft and the proportion of the portfolio with Open A1 increasedto 77%. We believe that we will achieve better long term growth from theselarger shopping parks with full Open A1 planning consent and have focused theportfolio accordingly. There have been many recent reports of a slowing down in the retail sector butwe remain confident that HUT's focus towards a high quality Open A1 portfoliowill continue to prove more attractive to retailers who remain committed to themigration to the out of town market. The portfolio continues to be reversionary- the current rental income in HUT of £97.6 million is expected to increase to£137.6 million when reviewed to current levels, ignoring any future growth. Liquidity in HUT continues to improve. During the year to 31 March, units with atotal value of £118 million were traded and HUT now has 107 unitholders, anincrease of 28 over March 2004. No Pillar units have been sold since May 2004. HIF(Pillar 67.3%) During the year, a new Jersey property unit trust, HIF, has been formed with thepurpose of investing in small retail parks comprising solus units and clusters,this being a key sub-sector of the UK retail warehouse market. The lot sizes are£5 to £20 million, the parks have long unexpired lease terms with good securityof income. We have recently been joined by the BT, Royal Mail and BAe PensionFunds, as co-investors. The portfolio is currently standing at £119 million on11 parks with further parks to be acquired shortly. At 31 March 2005 the groupowned 67.3% of the units in HIF. . It is At formation it was the group's intention to reduce its holding in HIF to less than 50% within a year. As partof this strategy, s Since the year end the group's share has been reduced to 25% through additional subscription of units. In accordance with FRS2, the group is treating its holding in HIF as an interest held exclusively with a view to subsequent resale and, accordingly, has equity accounted the investmentas a joint venture. Pillar's interest will be reduced as new parks are acquiredfor units and further discussions are in hand with another UK institution to inject a further property. HIF is ungeared at present but a prudent level of gearing would permit a significant increase in the portfolio, without dilutionof equity interests. Pillar Developments During the year we sold our remaining 50% interest in the Gallions ReachShopping Park at Beckton, the other 50% being held by HUT. We also soldManchester Fort Shopping Park, a 320,000 sq ft park near the City centre, for£167 million at a net initial yield of 4.5%. The Crown Point North ShoppingPark, a 213,000 sq ft park at Denton, east of Manchester, will be offered to HUTin due course. The remaining development site for a new retail park is atOrpington where construction has commenced to create 130,000 sq ft of retailspace. We also sold our 50% interest in the joint venture concerning the Cricklewooddevelopment site. This was sold to Multiplex for £18.6 million and was the finalremaining non-core asset in our portfolio. We retain a carried interest in this£3 billion development which could begin in 2007. Retail Parks - Europe(Pillar 36.4%) Our European fund, PREF, based in Luxembourg, has completed its first year'strading. It now has four parks aggregating to 1.24million sq ft, in Italy,Spain, Portugal and Belgium and has contracted to acquire a further two, whencomplete, in France and in Italy. Due diligence has commenced on the acquisitionof a further 4 parks in Italy and other acquisition possibilities are underinvestigation. When all of these acquisitions are complete in 2009, the PREFportfolio will comprise 10 parks with a value in excess of some €530 million.The process of identifying and securing retail park investments continues to beslower than we would like but we believe that the opportunity for capital growthof retail parks in the Eurozone remains strong. It has recently become apparentthat there is increasing investor interest in the sector with a consequenthardening of investment yields. We consider the most effective way of capturingfuture capital growth is by forward funding new developments, which whilstdelaying income flow, does allow us to influence the design and specificationfrom the outset. City Offices - CLOUT(Pillar 35.9%) There has been an improvement in our City of London activities in CLOUT. Thedevelopment of 180,000 sq ft of offices known as One Coleman Street has beenforward funded by a German institution with a major part pre-let to Legal &General. The second development, in Basinghall Street, was sold to StandardChartered Bank as a Turn-Key building developed by CLOUT. These two transactionswill make a sizeable contribution to Pillar's profits and cash over the next twoyears. Of CLOUT's remaining two investment properties, CityPoint, comprising707,000 sq ft, is now fully let following the recent letting of the top floorsto Macquarie Bank Group. Management and staff The good performance of Pillar and its related funds is due to a considerabledegree to the hard work and commitment of the whole Pillar team. I would like tothank them all for their valuable contribution. H R MouldChairman23 May 2005 Consolidated profit and loss account Joint Joint Group ventures Total Group ventures TotalYear ended 31 March 2005 Note £m £m £m £m £m £m---------------------- ----- ------- ------- ------- ------ ------- ------Turnover 2 15.0 55.5 70.5 32.2 51.9 84.1Cost of sales 3 (8.9) (5.4) (14.3) (1.7) (10.3) (12.0)---------------------- ----- ------- ------- ------- ------ ------- ------Gross profit 6.1 50.1 56.2 30.5 41.6 72.1---------------------- ----- ------- ------- ------- ------ ------- ------Administrativeexpenses (16.5) (1.5) (18.0) (19.2) (0.7) (19.9)---------------------- ----- ------- ------- ------- ------ ------- ------Operatingprofit/(loss) - Group 4 (10.4) 11.3- Joint ventures 48.6 40.9---------------------- ----- ------- ------- ------- ------ ------- ------Total operatingprofit/(loss): Groupand share of jointventures (10.4) 48.6 38.2 11.3 40.9 52.2Profit on disposal ofinvestment propertiesand units 5 23.1 4.2 27.3 3.2 18.4 21.6Net interest payableand similar charges (9.4) (34.4) (43.8) (21.7) (31.2) (52.9)---------------------- ----- ------- ------- ------- ------ ------- ------Profit/(loss) onordinary activitiesbefore taxation 3.3 18.4 21.7 (7.2) 28.1 20.9---------------------- ----- ------- ------- ------- ------ ------- ------Taxation (charge) onprofit on ordinaryactivities 6 (3.4) (0.2)---------------------- ----- ------- ------- ------- ------ ------- ------Profit attributable toordinary shareholders 18.3 20.7---------------------- ----- ------- ------- ------- ------ ------- ------Dividends paid andproposed 7 (2.3) (9.1)---------------------- ----- ------- ------- ------- ------ ------- ------Retained profit forthe year 15 16.0 11.6---------------------- ----- ------- ------- ------- ------ ------- ------Earnings per share -basic 8 18.8p 19.1p---------------------- ----- ------- ------- ------- ------ ------- ------Earnings per share -diluted 8 18.3p 18.8p---------------------- ----- ------- ------- ------- ------ ------- ------Dividends per share 7 2.6p 8.5p---------------------- ----- ------- ------- ------- ------ ------- ------ All items in the current and previous year derive from continuing activities. Balance sheets Group Group Company Company 2005 2004 2005 200431 March 2005 Note £m £m £m £m-------------------------- ----- -------- ------- -------- --------Fixed assets Investment properties 9 141.3 161.9 - 89.8Other tangible assets 0.3 0.4 - -Investment in subsidiaries - - 776.7 669.4Investment in joint ventures: -------- ------- -------- --------- Share of gross assets 1,368.1 1,309.7 - -- Share of gross liabilities (713.6) (691.3) - - -------- ------- -------- -------- 10 654.5 618.4 - --------------------------- ----- -------- ------- -------- -------- 796.1 780.7 776.7 759.2-------------------------- ----- -------- ------- -------- -------- Current assets Development properties - 12.2 - -Debtors: -------- ------- -------- --------- amounts falling due within oneyear 253.9 51.5 172.3 4.5- amounts falling due in more thanone year 2.5 5.4 - - -------- ------- -------- -------- 11 256.4 56.9 172.3 4.5Cash at bank and in hand 23.6 27.3 - --------------------------- ----- -------- ------- -------- -------- 280.0 96.4 172.3 4.5-------------------------- ----- -------- ------- -------- --------Creditors: Amounts falling duewithin one year 12 (298.6) (124.1) (228.1) (63.5)-------------------------- ----- -------- ------- -------- -------- Net current (liabilities) (18.6) (27.7) (55.8) (59.0)-------------------------- ----- -------- ------- -------- --------Total assets less currentliabilities 777.5 753.0 720.9 700.2Creditors: Amounts falling dueafter one year 13 (56.6) (97.4) - (44.6)-------------------------- ----- -------- ------- -------- --------Net assets 720.9 655.6 720.9 655.6-------------------------- ----- -------- ------- -------- -------- Capital and reserves Called up share capital 15 9.0 10.9 9.0 10.9Share premium account 15 3.3 0.3 3.3 0.3Revaluation reserve 15 389.5 273.6 172.3 85.2Merger reserve 15 60.0 60.0 - -Profit and loss account 15 259.1 310.8 536.3 559.2-------------------------- ----- -------- ------- -------- --------Equity shareholders' funds 720.9 655.6 720.9 655.6-------------------------- ----- -------- ------- -------- -------- Net assets per share 801p 603p 801p 603p-------------------------- ----- -------- ------- -------- -------- The financial statements were approved by the Board of Directors on 22 May 2005and were signed on its behalf by: MF McGann Director Consolidated cash flow statement 2005 2004Year ended 31 March 2005 £m £m £m £m----------------------------- ------- ------- ------- ------Net cash (outflow)/inflow from operating (3.1) 14.7activitiesDistributions received from joint ventures 67.5 35.8Returns on investments and servicing offinanceInterest received 1.3 9.1Interest paid (10.8) (26.8)----------------------------- ------- ------- ------- ------ (9.5) (17.7) Taxation 1.3 (4.1) Capital expenditurePurchase of investment properties anddevelopment expenditure (133.9) (186.1)Sale of investment properties 13.1 381.1Purchase of tangible fixed assets (0.1) (0.1)----------------------------- ------- ------- ------- ------ (120.9) 194.9 Acquisitions and disposals Purchase of subsidiaries (4.1) -Purchase of joint ventures (19.7) (2.6)Sale of joint ventures 91.9 63.1----------------------------- ------- ------- ------- ------ 68.1 60.5Equity dividends paid (8.9) (8.7)----------------------------- ------- ------- ------- ------ Net cash (outflow)/inflow before financing (5.5) 275.4----------------------------- ------- ------- ------- ------FinancingIssue of ordinary share capital 3.1 0.2Return of capital (109.7) - Increase/(decrease) in bank loans 108.4 (265.8)----------------------------- ------- ------- ------- ------ 1.8 (265.6)----------------------------- ------- ------- ------- ------(Decrease)/increase in cash in the year (3.7) 9.8----------------------------- ------- ------- ------- ------ Other primary statements 2005 2004Year ended 31 March 2005 £m £m--------------------------------------- ------- ------- Consolidated statement of total recognised gains andlossesProfit attributable to ordinary shareholders 18.3 20.7Unrealised surplus on revaluation of properties - group 17.8 15.4Unrealised surplus on revaluation of properties - joint 138.6 64.3venturesUnrealised surplus arising on sale of properties to unit (0.5) 0.5trustsNet exchange differences on retranslation of net investmentsand related borrowings - (0.9)--------------------------------------- ------- -------Total recognised gains and losses relating to the year 174.2 100.0--------------------------------------- ------- ------- 2005 2004Year ended 31 March 2005 £m £m--------------------------------------- ------- ------- Consolidated historical cost profits and losses Reported profit on ordinary activities before taxation 21.7 20.9Realisation of property revaluation gains of previous years 40.0 39.9--------------------------------------- ------- -------Historical cost profit on ordinary activities before 61.7 60.8taxation ------- ---------------------------------------------- Historical cost profit on ordinary activities after taxationand dividends 56.0 51.5--------------------------------------- ------- ------- Group Group Company Company 2005 2004 2005 2004Year ended 31 March 2005 £m £m £m £m------------------------------ ------- ------- -------- -------- Reconciliations of movements in shareholders'fundsProfit for the financial year 18.3 20.7 65.9 119.4Dividends paid and proposed (2.3) (9.1) (2.3) (9.1)------------------------------ ------- ------- -------- --------Retained profit for the year 16.0 11.6 63.6 110.3Unrealised surplus on revaluation ofinvestment properties - group and shareof joint ventures 156.4 79.7 1.8 11.9Unrealised surplus/(deficit) onrevaluation of investment in subsidiaries - - 107.3 (31.3)Unrealised surplus arising on sale ofproperties to unit trusts (0.5) 0.5 - -Net exchange differences on retranslationof net investments and related borrowings - (0.9) (0.8) -Return of capital (109.7) - (109.7) - On issue of ordinary share capital 3.1 0.2 3.1 0.2------------------------------ ------- ------- -------- --------Net increase/(decrease) in shareholders'funds during the year 65.3 91.1 65.3 91.1------------------------------ ------- ------- -------- --------Opening shareholders' funds 655.6 564.5 655.6 564.5------------------------------ ------- ------- -------- --------Closing shareholders' funds 720.9 655.6 720.9 655.6------------------------------ ------- ------- -------- -------- NOTES TO THE ACCOUNTS 1 Segmental and geographical information Group Group Profit Profit Group Group Group Group Operating Operating before before Net Net Turnover Turnover profit profit tax tax assets assets 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m------------- ------- ------- ------- -------- ------ ------ ------ -------Businesssegments:Fundmanagement 4.0 16.8 (3.1) 8.2 (3.1) 8.2 8.0 12.8Investmentand development 66.5 67.3 46.4 48.4 34.3 24.4 822.4 684.1Corporate - - (5.1) (4.4) (9.5) (11.7) (109.5) (41.3)------------- ------- ------- ------- -------- ------ ------ ------ ------- 70.5 84.1 38.2 52.2 21.7 20.9 720.9 655.6------------- ------- ------- ------- -------- ------ ------ ------ -------Geographicalsegments:United Kingdom 65.4 78.3 34.5 47.9 21.2 19.5 692.4 628.9Europe 5.1 5.8 3.7 4.3 0.5 1.4 28.5 26.7------------- ------- ------- ------- -------- ------ ------ ------ ------- 70.5 84.1 38.2 52.2 21.7 20.9 720.9 655.6------------- ------- ------- ------- -------- ------ ------ ------ ------- Share of turnover, operating profit and profit before tax of joint venturesrelate entirely to investment and development, wholly within the United Kingdom.Of the share of net assets of joint ventures £28.5 million (2004 - £26.7million) relate to investments in Europe and the remainder within the UnitedKingdom. 2 Turnover Joint 2005 Joint 2004 Group ventures Total Group ventures Total £m £m £m £m £m £m------------------ ------- ------- ------- ------- -------- -------Rental income 2.7 55.3 58.0 14.6 51.9 66.5Sales of developmentproperties 8.0 0.2 8.2 0.5 - 0.5Management andperformance fees 3.9 - 3.9 16.7 - 16.7Commission earned 0.4 - 0.4 0.4 - 0.4------------------ ------- ------- ------- ------- -------- -------Total turnover 15.0 55.5 70.5 32.2 51.9 84.1------------------ ------- ------- ------- ------- -------- ------- 3 Cost of sales Joint 2005 Joint 2004 Group ventures Total Group ventures Total £m £m £m £m £m £m------------------ ------- ------- ------- ------- -------- -------Direct property costs 1.4 2.2 3.6 1.2 2.9 4.1Costs of developmentproperties sold 7.3 0.2 7.5 - - -Management andperformance fees - 3.0 3.0 - 7.4 7.4Commission paid 0.2 - 0.2 0.5 - 0.5------------------ ------- ------- ------- ------- -------- -------Total cost of sales 8.9 5.4 14.3 1.7 10.3 12.0------------------ ------- ------- ------- ------- -------- ------- 4 Operating profit 2005 2004 £m £m------------------------------- ------- -------The operating profit is stated after charging: Directors' and staff remuneration including the 8.4 12.2CRISP and STARsSocial security costs of directors and staff 1.6 1.3Pension costs of directors and staff 0.6 0.4Operating lease payments 0.9 0.9Depreciation of owned assets 0.2 0.1------------------------------- ------- ------- Audit fees for the group were £102,500 (2004 - £90,000) and for the company were£nil (2004 - £nil). Other fees paid to the auditors and its associates were£1,088,000 (2004 - £1,210,000). KPMG LLP has been appointed as the group's tax adviser and agent as this isconsidered to be the most cost-efficient means to access the specialist taxadvice which Pillar requires, given the size and complexity of the transactionswhich the group undertakes; such advice necessarily requires a detailedknowledge of the group's structure and corporate history. The Audit Committeehas reviewed the level of the fees paid to the auditors and its affiliates, toensure that the auditors' independence is not compromised. 5 Profit on disposal of investment properties and units 2005 2004 Total Total £m £m------------------------------- ------- -------Initial cost of acquisition 114.7 242.1Additional capital expenditure 49.6 296.5------------------------------- ------- -------Total cost 164.3 538.6Revaluation surplus 40.0 28.0------------------------------- ------- -------Book value 204.3 566.6------------------------------- ------- -------Net sales proceeds 227.4 569.8Historical cost profit 63.1 31.2------------------------------- ------- -------Profit on sale of investment properties - group 23.1 3.2Profit on sale of investment properties - shareof joint ventures 4.2 18.4------------------------------- ------- ------- 27.3 21.6------------------------------- ------- ------- In 2004 £13.1 million on disposal of investment properties to joint ventures wasdeferred in that year. 6 Taxation 2005 2004 £m £m------------------------------- ------- -------UK corporation tax charge on profit for the 3.4 1.6yearAdjustments in respect of previous periods - (0.1)Deferred taxation released - (1.3)------------------------------- ------- -------Taxation charge 3.4 0.2------------------------------- ------- ------- The tax assessed for the year is lower than the standard rate for corporationtax in the UK (30%). The differences are explained below. 2005 2004 £m £m--------------------------------- ------- -------Profit on ordinary activities before tax 21.7 20.9--------------------------------- ------- -------Profit on ordinary activities at the standard rateof corporation tax 30% (2004 - 30%) 6.5 6.2Effects of:Utilisation of tax losses (1.5) -Current year taxable loss (1.0) 1.9Permanent disallowable expenditure - 0.2Accounting profit less than/(in excess of) capital 1.5 (3.3)gainLand remediation relief (1.8) (4.5)Capital allowances in excess of depreciation (0.3) (0.5)Payments to purchase capital losses - 1.6--------------------------------- ------- -------Actual current tax charge 3.4 1.6--------------------------------- ------- ------- The group allocates the tax charge arising on the sale of investment propertieson a pro rata basis between the gain previously recognised in the revaluationreserve and the further gain or loss arising on the sale in the profit and lossaccount. The full potential deferred taxation liability provided, and the amounts notprovided, in the financial statements are as follows: Amount Amount Amount Amount not not provided provided provided provided 2005 2004 2005 2004 £m £m £m £m----------------- -------- -------- --------- --------GroupArising on revaluationof investment properties - - 5.7 7.0Arising on revaluationof holding in unit trusts - - 81.7 42.1----------------- -------- -------- --------- -------- - - 87.4 49.1----------------- -------- -------- --------- -------- 7 Dividends paid and proposed 2005 2004 £m £m----------------------------- ------- -------Interim dividend paid of 2.6p (2004 - 2.4p) per share 2.3 2.5Final dividend proposed of nil (2004 - 6.1p) per share - 6.6---------------------------- ------- -------Total dividend paid and proposed of 2.6p (2004 - 8.5p) per share 2.3 9.1----------------------------- ------- ------- 8 Earnings per share The calculation of earnings per ordinary share is based on the profitattributable to ordinary shareholders of £18.3 million (2004 - profit £20.7million) and on a weighted average number of ordinary shares in issue during theyear ended 31 March 2005 of 97,377,718 (2004 - 108,570,186). On a diluted basis,the weighted average number of ordinary shares was 100,084,479 (2004 -109,932,190). The difference between weighted average number of shares on abasic and diluted basis is due to the effect of unexercised share options. 9 Investment properties Group Company Freehold Freehold land and land and buildings buildings £m £m-------------------------- ------------- ---------At 31 March 2004 at valuation 161.9 89.8Additions 146.7 23.9Disposals (166.3) (115.5)Disposals to joint ventures (18.8) -Surplus on revaluation of investment 17.8 1.8properties ------------------------ ------------- ---------At 31 March 2005 at valuation 141.3 ------------------------- ------------- --------- As at 31 March 2005, the group's investment portfolio was externally valued onthe basis of open market value by Savills Commercial Limited, CharteredSurveyors at £45.0 million (2004 - £37.0 million). The directors have valuedcertain properties, which are undergoing significant development which were notcompleted at the year end at £96.3 million (2004: £124.9 million), based onformal external assessments of gross development value (prior to adjustment forUITF28) given to the directors by the group's valuers. Included withininvestment properties is interest capitalised of £0.6 million (2004 - £3.0million). All of the above valuations were carried out in accordance with the RoyalInstitution of Chartered Surveyors Statements of Asset Valuation Practice andGuidance Notes. The historical cost of investment properties was £119.1 million(2004 - £134.0 million). 10 Joint ventures Shares of joint ventures £m---------------------------------- ---------GroupAt 31 March 2004 at valuation 618.4Net equity disposals (120.9)Exchange difference on retranslation of investments 0.8Surplus on revaluation of investment properties 137.8Share of profit for the year 18.4---------------------------------- ---------At 31 March 2005 at valuation 654.5---------------------------------- --------- The group has the following interests in property investment partnerships all ofwhich operate in the United Kingdom with the exception of Hercules Unit Trust,City of London Office Unit Trust, Austral House Unit Trust, Basinghall StreetUnit Trust and Hercules Income Fund which operate in Jersey, Channel Islands,and Pillar Retail Europark Fund which operates in Luxembourg. Hercules Unit Trust 34.4% interestHercules Limited Partnership 40.7% partnership interestCity of London Office Unit Trust 35.9% interestAustral House Unit Trust 35.9% interestBasinghall Street Unit Trust 35.9% interestHercules Income Fund* 67.3% interestPillar Retail Europark Fund 36.4% interestThe Auchinlea Partnership (a partnership with Capital & 50% partnershipRegional plc) interestCapability Green Development Joint Venture (a partnership 50% partnershipwith Haslemere Estates) interestPillarCaisse Partnership (a partnership with Caisse deDepot et Placement du Quebec)PillarCaisse Management Limited 50% of ordinary sharesThe PillarCaisse (Banbury) Partnership 50% partnership interestChampneys CityPoint Limited 50% of ordinary shares *Hercules Income Fund (HIF) was established during the year. As shown above, at31 March 2005 the group owned 67.3% of the units in HIF. At formation it was the group's intention to reduce its holding in HIF to less than 50% within a year. Since the year end the group's share has been reduced to 25%through additional subscription of units and, accordingly, has equity accountedthe investment as a joint venture. Summarised aggregated financial statements City of Pillar London Retail Hercules Office Europark Hercules Unit Unit Fund Income Trust Trust Fund £m £m £m £m------------------ -------- -------- -------- ---------Profit and loss account Turnover 95.9 38.0 12.2 0.6------------------ -------- -------- -------- ---------Operating profit 89.8 33.0 9.0 0.4Profit/(loss) on disposalof investment properties (9.4) - - -Net interest payable (57.3) (30.3) (5.5) ------------------- -------- -------- -------- ---------Profit before and after 23.1 2.7 3.5 0.4tax -------- -------- -------- ---------------------------Balance sheet Investment properties 2,306.3 581.5 160.1 42.5Other assets 585.3 20.7 18.5 3.8Current liabilities (206.1) (13.0) (11.8) (1.2)Borrowings due in morethan one year (1,158.0) (433.0) (88.5) ------------------- -------- -------- -------- ---------Net assets 1,527.5 156.2 78.3 45.1------------------ -------- -------- -------- ---------Group share Percentage interest at 34.4% 35.9% 36.4% 67.3%year end £m £m £m £m------------------ -------- -------- -------- ---------Group share of------------------ -------- -------- -------- ---------Turnover 33.1 13.6 5.0 0.6Management andperformance fees (1.3) (1.1) (0.4) (0.1)Other costs (0.8) (0.7) (0.9) (0.1)------------------ -------- -------- -------- ---------Operating profit 31.0 11.8 3.7 0.4Profit/(loss) on disposalof investment properties (3.3) - - -Net interest payable (19.7) (10.8) (2.2) ------------------- -------- -------- -------- ---------Profit before and after 8.0 1.0 1.5 0.4tax -------- -------- -------- ---------------------------Revaluation surplusFor the year 133.9 2.5 (0.1) 0.7------------------ -------- -------- -------- ---------Joint ventureinvestment properties 793.8 209.0 58.2 28.6------------------ -------- -------- -------- ---------Joint venture gross 995.2 216.4 65.0 31.2assets -------- -------- -------- ---------------------------Joint venture gross (469.5) (160.3) (36.5) (0.8)liabilities -------- -------- -------- ---------------------------Joint venture net assets 525.7 56.1 28.5 30.4------------------ -------- -------- -------- --------- Summarised aggregated financial statements, contd. Austral Basinghall House Street Total Total Auchinlea Unit Unit Trust Others 2005 2004 Trust £m £m £m £m £m £m---------------- ------- -------- -------- ------- ------- -------Profit and lossaccount Turnover 1.7 - - 4.3 152.7 135.3---------------- ------- -------- -------- ------- ------- -------Operating profit 0.8 - - 2.5 135.5 107.3Profit/(loss) ondisposal ofInvestmentproperties 11.6 4.7 - - 6.9 37.7Net interestpayable (3.0) - - - (96.1) (81.9)---------------- ------- -------- -------- ------- ------- -------Profit before andafter tax 9.4 4.7 - 2.5 46.3 63.1---------------- ------- -------- -------- ------- ------- -------Balance sheet Investmentproperties - - - - 3,090.4 3,033.0Other assets 17.5 8.1 123.0 9.2 786.1 461.8Currentliabilities (11.2) - (81.2) (6.4) (330.9) (349.5)Borrowings due inmore than one year - - (21.8) (1.4) (1,702.7) (1,511.4)---------------- ------- -------- -------- ------- ------- ------- Net assets 6.3 8.1 20.0 1.4 1,842.9 1,633.9---------------- ------- -------- -------- ------- ------- -------Group share Total TotalPercentageinterest at year end 50% 35.9% 35.9% 2005 2004 £m £m £m £m £m £m---------------- ------- -------- -------- ------- ------- -------Group share of---------------- ------- -------- -------- ------- ------- ------- Turnover 0.9 - - 2.3 55.5 51.9Management andperformance fees - - - (0.1) (3.0) (7.4)Other costs (0.4) - - (1.0) (3.9) (3.6)---------------- ------- -------- -------- ------- ------- -------Operating profit 0.5 - - 1.2 48.6 40.9Profit/(loss) ondisposal ofInvestmentproperties 5.8 1.7 - - 4.2 18.4Net interestpayable (1.6) - - (0.1) (34.4) (31.2)---------------- ------- -------- -------- ------- ------- -------Profit before andafter tax 4.7 1.7 - 1.1 18.4 28.1---------------- ------- -------- -------- ------- ------- -------Revaluationsurplusfor the year - - - - 137.0 64.3---------------- ------- -------- -------- ------- ------- -------Joint ventureinvestmentProperties - - - - 1,089.6 1,112.1---------------- ------- -------- -------- ------- ------- -------Joint venturegross assets 8.7 2.9 44.2 4.5 1,368.1 1,309.7---------------- ------- -------- -------- ------- ------- -------Joint venturegross liabilities (5.6) - (37.0) (3.9) (713.6) (691.3)---------------- ------- -------- -------- ------- ------- -------Joint venture netassets 3.1 2.9 7.2 0.6 654.5 618.4---------------- ------- -------- -------- ------- ------- ------- As at 31 March 2005, the joint venture investment properties were externallyvalued at an aggregate value of £3,090.4 million (2004 - £3,033.0 million) by CBRichard Ellis Limited and Savills Commercial Limited, Chartered Surveyors. Thehistorical cost of investment properties was £2,376.3 million (2004 - £2,600.2million). HUT's other assets include its share of investment properties held in jointventures amounting to £203.4m. Pillar's share of these properties is £70.0m. In the year to 31 March 2005, the group received management fees of £8.9 million(2004 - £7.4 million) and performance related fees of £nil (2004 - £9.2 million)from various joint ventures. At 31 March 2005 the group was owed £8.7 million (2004 - £15.8 million) by jointventures. 11 Debtors Group Group Company Company 2005 2004 2005 2004 £m £m £m £m----------------------- ------- ------- -------- -------Amounts receivable within oneyear:Trade debtors 4.7 0.9 2.3 -Amounts owed by subsidiary - - 2.7 2.7undertakingsAmounts receivable on completionof property sales 233.5 34.2 167.3 -Deferred taxation 4.1 - - -Other debtors 11.3 15.4 - 1.8Prepayments and accrued income 0.3 1.0 - ------------------------ ------- ------- -------- ------- 253.9 51.5 172.3 4.5----------------------- ------- ------- -------- -------Amounts receivable after one year: Other debtors 2.5 5.4 - ------------------------ ------- ------- -------- ------- 256.4 56.9 172.3 4.5----------------------- ------- ------- -------- ------- 12 Creditors: Amounts falling due within one year Group Group Company Company 2005 2004 2005 2004 £m £m £m £m------------------------ ------- ------ ------- -------Bank loans and overdrafts -secured (note 13) 206.1 56.9 162.3 13.0Trade creditors 1.0 1.7 - -Amounts owed to subsidiary - - 34.4 43.9undertakingsAmount due on completion ofproperty acquisitions 78.6 34.8 31.0 -Proposed dividend - 6.6 - 6.6Corporation tax 9.6 4.9 - -Other taxation and social security 0.1 14.9 - -Accruals and deferred income 3.2 4.3 0.4 ------------------------- ------- ------ ------- ------- 298.6 124.1 228.1 63.5------------------------ ------- ------ ------- ------- 13 Creditors: Amounts falling due after one year Group Group Company Company 2005 2004 2005 2004 £m £m £m £m-------------------- ------- ------- ------- -------Bank loans 51.7 82.1 - 44.6Loan notes 4.9 15.3 - --------------------- ------- ------- ------- ------- 56.6 97.4 - 44.6-------------------- ------- ------- ------- ------- Security is provided on bank loans and loan notes by way of fixed charges overproperty, units in HUT and CLOUT and floating charges over the assets of certainsubsidiary undertakings. 14 Financial instruments The group's strategy in respect of the use of financial instruments to managerisk is detailed in the Operating and Financial Review. The group has taken advantage of the exemption under FRS13, that short termdebtors and creditors be excluded from the following disclosures. The disclosures include the group's share of financial liabilities of its jointventure partnerships and the associated financial instruments used to manage theinterest rate exposures arising therefrom. Financial assets The group's only financial assets are short term debtors (note11) and cash at bank and in hand. Liquidity risk - profile The maturity profile of the group's financialliabilities is set out below: Share Share of joint of joint Group ventures Group ventures 2005 2005 2004 2004 £m £m £m £m-------------------------------- ------- ------- ------- --------In one year or less or on demand 206.1 51.6 56.9 0.9In more than one year but not more thantwo years 50.1 - 77.3 -In more than two years but not more thanfive years 1.6 370.4 15.2 32.8In more than five years 4.9 224.8 4.9 523.6-------------------------------- ------- ------- ------- -------- Total 262.7 646.8 154.3 557.3-------------------------------- ------- ------- ------- -------- The group has undrawn loan facilities which expire as set out below: Share Share of joint of joint Group ventures Group ventures 2005 2005 2004 2004 £m £m £m £m-------------------------------- ------- ------- ------- --------In one year or less 82.3 - 43.3 -In more than one year but not more thantwo years 19.8 - 17.9 -In more than two years but not more thanfive years - 40.9 56.5 12.1In more than five years - 7.6 - 101.2-------------------------------- ------- ------- ------- -------- Total 102.1 48.5 117.7 113.3-------------------------------- ------- ------- ------- -------- Interest rate risk - profile Fixed rate Capped rate Floating Fixed rate Floating rate rate liabilities liabilities liabilities Total liabilities liabilities Total 2005 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m £m------------ -------- -------- -------- ------- -------- --------- -------Group 9.2 - 253.5 262.7 9.5 144.8 154.3Group shareof joint ventures 413.4 28.2 205.2 646.8 475.6 81.7 557.3------------ -------- -------- -------- ------- -------- --------- ------- Total 422.6 28.2 458.7 909.5 485.1 226.5 711.6------------ -------- -------- -------- ------- -------- --------- ------- Hedge profile - type of protection Fixed Fixed Capped Capped Fixed Fixed rate rate rate rate rate rate Weighted Weighted Weighted Weighted Weighted Weighted average average average average average average rate period rate period rate period 2005 2005 2005 2005 2004 2004 % % % Years % Years------------ -------- -------- -------- -------- -------- --------Group 5.2 0.3 - - 5.2 0.1Group share ofjoint ventures 5.2 4.8 5.4 5.6 5.2 4.0------------ -------- -------- -------- -------- -------- -------- Hedge profile - maturity of protection Share of Share of Joint Joint Group ventures Group ventures 2005 2005 2004 2004 £m £m £m £m----------------------- ------- -------- ------- --------In one year or less 9.2 - 9.5 8.8In more than one year but not morethan two years - 35.9 - 89.6In more than two years but notmore than five years - 46.7 - 203.7In more than five years - 359.0 - 173.5----------------------- ------- -------- ------- -------- 9.2 441.6 9.5 475.6----------------------- ------- -------- ------- -------- Fair values The fair values of the group's financial liabilities, including itsshare of financial liabilities in joint ventures are set out below: Notional Fair Fair value Fair value principal value adjustments adjustments 2005 2005 2005 2004 £m £m £m £mRelated Shares:
British Land